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U.S. Producer Prices Rebound Along With Energy Prices

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After reporting an unexpected decrease in producer prices in the previous month, the Labor Department released a report on Thursday showing U.S. producer prices rebounded by slightly more than anticipated in the month of October.

The Labor Department said its producer price index for final demand climbed by 0.4 percent in October after falling by 0.3 percent in September. Economists had expected producer prices to rise by 0.3 percent.

The bigger than expected increase in producer prices came amid a substantial rebound in energy prices, which surged up by 2.8 percent in October after tumbling by 2.5 percent in each of the two previous months. Gasoline prices spiked by 7.3 percent.

Food prices also showed a significant increase, jumping by 1.3 percent in October following a 0.3 percent increase in September.

Excluding food and energy prices, core producer prices still rose by 0.3 percent in October following a 0.3 percent drop in September. Core prices had been expected to edge up by 0.2 percent.

The rebound in core prices came as prices for services increased by 0.3 percent in October after dipping by 0.2 percent in the previous month.

Prices for trade services climbed by 0.8 percent in October after slumping by 1.0 percent in September, while prices for transportation and warehousing services rose by 0.3 percent and prices for other services inched up by 0.1 percent.

The Labor Department said a major factor in the advance by the index for final demand services was margins for apparel, jewelry, footwear, and accessories retailing, which rose 2.6 percent.

Prices for outpatient care, inpatient care, food wholesaling, food and alcohol retailing, and truck transportation of freight also moved higher.

In contrast, prices for securities brokerage, dealing, investment advice, and related services plummeted by 8.4 percent.

Compared to the same month a year ago, producer prices in October were up by 1.1 percent, reflecting a notable slowdown from the 1.4 percent growth in September.

The annual rate of core producer price growth also slowed considerably to 1.6 percent in October from 2.0 percent in September.

"Overall, this all supports our view that there is little danger of inflation rising sustainably above the Fed's target," said Andrew Hunter, Senior U.S. Economist at Capital Economics. "In that environment, interest rates are likely to remain on hold for the foreseeable future."

On Wednesday, the Labor Department released a separate report showing U.S. consumer prices rose by slightly more than anticipated in the month of October.

The Labor Department said its consumer price index climbed by 0.4 percent in October after coming in unchanged in September. Economists had expected consumer prices to rise by 0.3 percent.

Excluding food and energy prices, core consumer prices edged up by 0.2 percent in October after inching up by 0.1 percent in September. The continued uptick in core prices matched economist estimates.

Compared to the same month a year ago, consumer prices were up by 1.8 percent in October, reflecting a slight acceleration from the 1.7 percent growth seen in September.

Meanwhile, the annual rate of growth in core consumer prices slowed to 2.3 percent in October from 2.4 percent in September.

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